The North and its Logistics Michael Gordon, Vice President June 5, 2015 The Nunavik Region North of the 55th parallel in the Province of Quebec covering a mass of 505,000 square kms A population of approximately 12 000 (90% Inuit) Roughly 60% of the population is under the age of 25 Nunavimmiut are burdened with the high cost of living which is further amplified by sales taxes No road links to the ‘South,’ dependence on Airlines and Sealift Nunavik Economy • Traditionally, a hunting and gathering economy • Today: combination of traditional, wage and business • Few full time hunters, many part time hunters (costs money to hunt) • Traditional economy (harvesting, production of clothing, arts & crafts) still vital to the Nunavik family: we still depend heavily on food from the land • More recent trend, growth of Inuit owned businesses (including servicing of the mining sector) Makivik Corporation • key player in building and developing Nunavik • mandated to protect the rights and culture of Inuit • administers the funds provided by the: • JBNQA (1975) • Sanarrutiit Agreement (2002) • and the offshore NILCA (2008) • to relieve poverty and to promote the welfare, advancement of Inuit How does Makivik meet it’s Economic and Socio-economic Objectives Invest funds in capital markets Create businesses: subsidiaries & joint-ventures Provide jobs to beneficiaries through our group of companies Socio-economic projects Assist in community projects & infrastructures Air Inuit - Mission • Air Inuit was founded with the mission of keeping Quebec’s northernmost communities connected by providing air transportation across the vast territory of Nunavik. • Foremost goal is insuring the safety of our passengers. Air Inuit - Mission • Health and well-being of our employees. • Commitment to customer satisfaction is deeply engrained in our corporate culture. • Support social, educational and cultural programs. • Promote training and employment of Inuit. Milestones Air Inuit - Milestones • Air Inuit began operations in 1978. It is Makivik’s first subsidiary which was based in Kuujjuaq. • In 1983 the company purchased the routes along the Eastern Hudson Bay coast from Austin Airways. • Opened a base in Kuujjuaraapik which was later relocated to La Grande to address the growing demand to move cargo and machinery in the region due to the mining industry. Air Inuit - Milestones • In 1988, Johnny May Air Charters was acquired running float services in the Kuujjuaq Region. • 1995 saw the expansion of the company introducing the Dash 8 service between Montreal and Nunavik. • 1998 - Nunavik Rotors starts service based out of Kuujjuaq. Air Inuit - Milestones • 2008 – Acquired our first Jet 737- 200, we now have two in our fleet. • 2010 Partnership with Innu – Innukoptères. • 2012 Opening of our multi-purpose Centre and new head office at Trudeau International Airport. Routes 650 Employees 27 Aircraft Specialized Services • Medical Evacuations – Essential necessity in the North. • Maintenance – Air Inuit offers a broad range of aircraft maintenance services including complete maintenance checks and airframe repairs. • Operates Hydro-Quebec’s Q300 & Q400 Fleet Social responsibility Social Responsibility • Support of community organizations, educational programs, athletic training and cultural events. • Scholarships and affirmative-action programs. • Ilaujuaq program making air travel more accessible to our beneficiaries. • Katutjiniq program for new business for reduced airfare and cargo rates. First Air 1 First Air – Who are we? 2 Trends in Canada‘s northern aviation industry First Air 3 Our strategy 4 Our assets and fleet 5 Northern challenges First Air is the leading provider of air transport in the North Founded in 1946, Bradley Air Services Limited, headquartered in Kanata, Ontario, has been doing business as ‘First Air’ since 1973. First Air is the leading provider of scheduled passenger and cargo services, as well as charter services, in northern Canada, including the Arctic and High Arctic. Other services include: Aircraft maintenance service including aging programs, engineering services (supplemental Type Certificates). Scheduled route network covers 29 communities, carrying over 23 million kilograms of freight and over 225,000 passengers per year. What makes us unique? 3 Hubs in the North 4 Gateways in the South 19 Aircraft in the fleet 29 Communities served 1,000 Dedicated employees 65,000 Kilos of cargo every day 225,000 Passengers per year > 5 Million Happy customers since 1973 Recent trends in Canada’s Northern aviation industry Trend Description Opportunity • Growth in Northern Canada is outpacing the national average, but not as strong as before • First Air has the most Slower growth in • Stable commodity pricing not fuelling increased comprehensive route exploration and development network in Northern Canada Northern Canada • Strong economic performance in some communities and quickly adapts to meet (e.g. Iqaluit) mainly driven by Government investment supply & demand • Faster population growth increasing need for supply lines to provide food and everyday items • Limited infrastructure and a challenging climate create • First Air has the flexibility Cyclical demand for the need for specialized aviation transportation to quickly take advantage specialized air • Cyclical demand for airlines with heavy lift, bulk of business when transportation and gravel equipped capabilities investment in exploration transport services increases • The Northern Canadian aviation niche is led by: • First Air (Nunavut + NWT) • Canadian North (Nunavut + NWT) Additional • Long-term contracts as • Air North (Yukon), Calm Air (Kivalliq) First Air continues to have competition in niche • Routes are uneconomical for many other carriers as the best aircraft, the best they can’t carry the freight needed to compensate for market network and the best product at low passenger volumes attractive fares in Northern Canada • Smaller players lack back-up aircraft Our strategy is to capitalize on our assets, increase our yield per flight and strictly adhere to cost reduction Connect the North with the most efficient hub & spoke structure Offer the best connections to/from the North Offer a high quality single class Economy Plus product Link our schedules to connections in the South Achieve the highest possible yield per passenger or revenue per tonne/km Operate at the lowest possible cost with the best aircraft for the job Supplement core scheduled business with specialized charter services Evaluate and execute key airline partnerships and codeshare agreements First Air now operates today 2 types of aircraft. Streamlining our fleet is key to continue reducing our cost + improve revenues 2015 We offer our 737-400 Combi and for specialized gravel charter work Demand for bulk load such as trucks and fuel Demand for gravel equipped jets to airstrips or airports with unpaved runways Most aircraft not due for major checks, use them as much as we can Profitable charter contracts Page 10 of 15 First Air and the communities we served - A key partnership community reinvestment i.e. Job opportunities - Half of our staff is locally hired Preferred pricing agreements with a number of communities and beneficiaries Preferred cargo rates - To support communities traditional lifestyle We offer social responsibility and leadership in northern transportation services Some examples • Arctic wind riders / Arctic winter games • Children Wish foundation • Habitat for community • Others Page 10 of 15 3 major challenges in northern aviation - We can change two only 1. Infrastructure 2. High Cost 3. Weather Page 11 of 15 NEAS GROUP Nunavut Eastern Arctic Shipping Inc., Nunavik Eastern Arctic Shipping Inc., NEAS Inc. 1-877-225-6327 www.NEAS.ca 36 ARCTIC PIONEERS Merkosak Construction Ltd Savik Entreprises Ltd 37 YOUR BEST ARCTIC SEALIFT CHOICE 38 SERVICE AREAS Service Eastern & Western Arctic: • Labrador • Nunavik • Nunavut • Baffin • Kivalliq • Kitikmeot • Iqaluit Region • Navigate Northwest Passage Customers: individuals, communities, stores, businesses, mines, government departments and agencies 39 GROWING FLEET OF CANADIAN FLAG VESSELS… 40 INUIT TRAINING, EMPLOYMENT, PROMOTION, EQUITY PARTNERS • Inuit training, employment, promotion and meaningful local ownership opportunities. • We contribute and enable positive local economic development with Inuit businesses • Inuit employees on NEAS vessels each season, with advancement opportunities 41 THE ARCTIC GATEWAY: PORT OF VALLEYFIELD •NEAS Cargo Service Center •MV Qamutik •MV Avataq •MV Umiavut •NEAS Terminal and Office • About ½ of all marine cargo to Nunavut and Nunavik goes through Valleyfield NEAS CARGO SERVICE CENTRE 43 AN ESSENTIAL SERVICE DELIVERED UNDER EXTREME CONDITIONS • The Canadian Arctic marine operating conditions are the most extreme on the planet • Extreme climate, weather, tide and ice conditions – short navigational season – operational delays in discharge process • All communities are dependent on marine resupply – lack of basic marine infrastructure, including ramps – no safe or secure marine work areas on beaches – no safe anchorage or mooring buoys for vessels – few navigational aids and limited hydrographic charts 44 BIG CHANGES IN ARCTIC SEALIFT • Arctic marine operations have significantly changed: • Shift from tug and barge to lightering operations • More vessels • Larger vessels, mooring farther off the coast • Increased marine traffic with more navigations • Growing cargo volumes • More stops in